Funds
that buy shares in the less-developed nations posted inflows of $407 million in
the first six weeks of 2014, while $21 billion was pulled from emerging
markets, EPFR Global data show. A gain of about 3 percent in the MSCI Frontier
Market Index this year pushed stocks to a 2008 high Feb. 19, even as
slower China growth and the Federal Reserve’s plan to trim bond buying weighed
on developing and developed-nation gauges.

Benchmark
stock indexes in the United Arab Emirates, Qatar and Vietnam, whose central
banks control local currencies, are among the 10 best performers this year
within global equity gauges tracked by Bloomberg. While investors dump
emerging- market currencies including the Turkish lira, Hungary’s forint and
Brazil’s real, bourses in those nations languished with the world’s worst
performers in 2014.

A
currency rout triggered by political instability from Ukraine to Turkey and the
fallout from the Fed’s tapering plan cut into equity returns. A Bloomberg gauge
tracking 20 developing-nation currencies and the MSCI Emerging Markets Index
are down 1.7 percent and 4.3 percent respectively in 2014.

Equities
in Qatar, the world’s largest exporter of liquefied natural gas, have rallied
14 percent this year, while Abu Dhabi’s gauge has gained 15 percent and Dubai’s
benchmark posted returns of 24 percent, the most among 50 of the world’s
largest equity markets. The Persian Gulf countries keep their currencies pegged
to the dollar because earnings from energy exports are denominated in the U.S.
currency.

Shares
in Dubai are benefiting from an economic recovery as the regional business hub
gears up to host the World Expo in 2020 with $8 billion of infrastructure
spending. The event, which traces its roots to London’s Great Exhibition of
1851, gave Paris its Eiffel Tower in 1889 and drew 73 million visitors to
Shanghai in 2010. Qatar’s government forecasts a current- account surplus of
about 23 percent of gross domestic product this year and growth of 4.6 percent.

Persian
Gulf “markets enjoy a current account surplus and have never relied on global
financing,” Rami Sidani, the Dubai- based head of Middle East and North Africa
investments at Schroder Investment Management Ltd., said by e-mail on Feb. 18.
“Their dollar-based economies mean that they do not present any currency risk.”

Fixed
exchange rates have also helped spur a rally in Tunisian and Vietnamese shares
this year, Sidani said.

Managed
exchange rates in countries with less financial prowess to defend them have
posed risks to the dollar- denominated returns of investors as countries from
Argentina to Kazakhstan scale back support for their currencies.

Kazakhstan,
whose biggest trading partner is Russia, devalued the tenge by the most since
2009 on Feb. 11, citing pressure on its currency from a weaker ruble. The
nation’s benchmark, up 18 percent in 2014, dropped the most in a month the next
day.

Nigeria’s
benchmark stock index has fallen 7.3 percent this year as the central bank
comes under pressure to tap into reserves and defend the naira. The currency
weakened to a record low versus the dollar today after the government suspended
central bank Governor Lamido Sanusi.